Monday, January 28, 2008

As tax time rolls around once again, I thought it might be a good time to review the federal tax credit you may be eligible for if you bought your hybrid car in 2007. There's no doubt that when you bought your hybrid car, you were aware that a federal tax credit existed. But now that the time to file is here, you may want to know a bit more about it.

I will be summarizing most of the information you need to know about the Alternative Federal Tax Credit as part of the Energy Policy Act of 2005 in this post, but if you want to really get into some more details, there are some links you should follow at the end of this post.

Warning! Warning! Warning!I would like to warn you now. I am not a tax expert and any advice and information you get from this site should be followed up with your own research and talking with your own tax adviser.

I RecommendBTW, if you are already overwhelmed by the length of this post or you just want to make your life easier, I would recommend using TaxCut from H&R Block or some other tax credit software. It certainly makes your life easier and should have all the forms you need right there. I'll be repeating this recommendation because I do believe in it. You may notice the link is an affiliate one, which means I would get a bonus if you follow the link and buy the product. I would not be doing that unless I thought it was a good product to buy.

Still here? Alright then, let's get into it.

Are You Eligible?Even if the hybrid car qualifies for the tax credit (i.e. you bought a Toyota in time or your hybrid car appears in the table of models below), you, the taxpayer, have to qualify. Some basic requirements:

The vehicle must be placed in service after 12-31-05 and purchased on or before 12-31-10.

The original use of the vehicle must begin with the taxpayer claiming the credit.a. The credit may only be claimed by the original owner of a new, qualifying, hybrid vehicle and does not apply to a used hybrid vehicle.

The vehicle must be acquired for use or lease by the taxpayer claiming the credit.a. The credit is only available to the original purchaser of a qualifying hybrid vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.b. For qualifying vehicles used by a tax-exempt entity, the person who sold the qualifying vehicle to the person or entity using the vehicle is eligible to claim the credit, but only if the seller clearly discloses in a document to the tax-exempt entity the amount of credit.

The vehicle must be used predominantly within the United States.

Congratulations, You May Be Eligible For a Tax CreditIf all of the above applies to you, then you may be eligible (more on that may later) for a tax credit. Tax credits are nice because you can take the money right off of what you owe in taxes. To be clear, according to the IRS: a tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation.

Sounds nice, right?

Which Hybrid Car Did You Buy and When?So, step 1 is to figure out what kind of car you bought and whether or not it is on the list of qualifying credits. Well, you need three pieces of information for that. First, what is the model year of the hybrid car you bought? Second, what make and model is it? And third, when did you buy it (This last one is for those who bought a Toyota hybrid in 2007)? The next few tables are organized by model year, then by make and model and will tell you how much you might qualify for.

60,000 LimitOne last thing before we get to the tables on why you need to know when you bought (received) your hybrid car. Congress wanted to build in an incentive for domestic car companies since it was clear that Toyota and Honda had a huge head start in the hybrid car marketplace, so Congress put a 60,000 unit limit on the number of hybrid cars sold since the beginning of 2005. Once they passed that limit in a quarter, a phase-out period on the tax credit would begin.

Toyota blew past the 60,000 unit limit on hybrid cars very quickly, so you will see below the tax credit in 2007 is affected by when you received your hybrid car. This affects Toyota and Lexus hybrids. Honda just passed the federal tax credit limit this year, and so the tax credit for those who buy from Honda will be affected starting in 2008. Ford (Mazda and Mercury), GM (GMC, Chevy, Saturn) and Nissan have little chance of passing the limit anytime soon.

2005 Model Year Hybrid Vehicles

Make

Model

Credit Amount

Ford

Escape HEV 2WD

$2,600

Ford

Escape HEV 4WD

$1,950

Honda**

Accord Hybrid AT

Purchase Date

Prior to 1/1/08

$650

1/1/08 -- 6/30/08

$325

7/1/08 -- 12/31/08

$162.50

1/1/09 and later

$0

Honda**

Hybrid Navi AT

Purchase Date

Prior to 1/1/08

$650

1/1/08 -- 6/30/08

$325

7/1/08 -- 12/31/08

$162.50

1/1/09 and later

$0

Honda**

Civic Hybrid CVT

Purchase Date

Prior to 1/1/08

$1,700

1/1/08 -- 6/30/08

$850

7/1/08 -- 12/31/08

$425

1/1/09 and later

$ 0

Honda**

Civic Hyrid MT

Purchase Date

Prior to 1/1/08

$1,700

1/1/08 -- 6/30/08

$850

7/1/08 -- 12/31/08

$425

1/1/09 and later

$ 0

Honda**

Insight CVT

Purchase Date

Prior to 1/1/08

$1,450

1/1/08 -- 6/30/08

$ 775

7/1/08 -- 12/31/08

$ 387.50

1/1/09 and later

$ 0

Toyota*

Prius

Purchase Date

1/1/06 -- 9/30/06

$3,150

10/1/06 --3/31/07

$1,575

4/1/07 -- 9/30/07

$787.50

10/1/2007 and later

$0

2006 Model Year Hybrid Vehicles

Make

Model

Credit Amount

Chevrolet

Silverado 2WD Hybrid Pickup Truck

$ 250

Chevrolet

Silverado 4WD Hybrid Pickup Truck

$ 650

Ford

Escape Hybrid 2WD Front Wheel Drive

$2,600

Ford

Escape Hybrid 4WD

$1,950

GMC

Sierra 2WD Hybrid Pickup Truck

$ 250

GMC

Sierra 4WD Hybrid Pickup Truck

$ 650

Honda**

Accord Hybrid AT w/updated calibration*

Purchase Date

Prior to 1/1/08

$1,300

1/1/08 -- 6/30/08

$650

7/1/08 -- 12/31/08

$325

1/1/09 and later

$ 0

Honda**

Accord Hybrid AT without updated calibration*

Purchase Date

Prior to 1/1/08

$650

1/1/08 -- 6/30/08

$325

7/1/08 -- 12/31/08

$162.50

1/1/09 and later

$ 0

Honda**

Navi AT w/updated calibration*

Purchase Date

Prior to 1/1/08

$1,300

1/1/08 -- 6/30/08

$650

7/1/08 -- 12/31/08

$325

1/1/09 and later

$ 0

Honda**

Navi AT without updated calibration*

Purchase Date

Prior to 1/1/08

$650

1/1/08 -- 6/30/08

$325

7/1/08 -- 12/31/08

$162.50

1/1/09 and later

$ 0

Honda**

Civic Hybrid CVT

Purchase Date

Prior to 1/1/08

$2,100

1/1/08 -- 6/30/08

$1,050

7/1/08 -- 12/31/08

$525

1/1/09 and later

$0

Honda**

Insight CVT

Purchase Date

Prior to 1/1/08

$1,450

1/1/08 -- 6/30/08

$ 725

7/1/08 -- 12/31/08

$362.50

1/1/09 and later

$0

Lexus*

RX400h 2WD

Purchase Date

1/1/06 -- 9/30/06

$2,200

10/1/06 --3/31/07

$1,100

4/1/07 -- 9/30/07

$ 550

10/1/2007 and later

$ 0

Lexus*

RX400h 4WD

Purchase Date

1/1/06 -- 9/30/06

$2,200

10/1/06 --3/31/07

$1,100

4/1/07 -- 9/30/07

$ 550

10/1/2007 and later

$ 0

Mercury

Mariner 4WD Hybrid

$1,950

Toyota*

Highlander 2 WD Hybrid

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Toyota*

Highlander 4WD Hybrid

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Toyota*

Prius

Purchase Date

1/1/06 -- 9/30/06

$3,150

10/1/06 --3/31/07

$1,575

4/1/07 -- 9/30/07

$787.50

10/1/2007 and later

$ 0

* Credit for Toyota/Lexus vehicles are reduced for purchase after 10-1-06. See Notice 2006-78 for additional information.

** Credits for Honda vehicles are reduced for purchase after 1-1-08. See Notice 2007-98 for additional information.

2007 Model Year Hybrid Vehicles

Make

Model

Credit Amount

Chevrolet

Silverado 2WD Hybrid Pickup Truck

$ 250

Chevrolet

Silverado 4WD Hybrid Pickup Truck

$ 650

Ford

Escape Hybrid 2WD

$2,600

Ford

Escape Hybrid 4WD

$1,950

GMC

Sierra 2WD Hybrid Pickup Truck

$ 250

GMC

Sierra 4WD Hybrid Pickup Truck

$ 650

Honda**

Accord Hybrid AT

Purchase Date

Prior to 1/1/08

$1,300

1/1/08 -- 6/30/08

$ 650

7/1/08 -- 12/31/08

$ 325

1/1/09 and later

$ 0

Honda

Accord Hybrid Navi AT

Purchase Date

Prior to 1/1/08

$1,300

1/1/08 -- 6/30/08

$ 650

7/1/08 -- 12/31/08

$ 325

1/1/09 and later

$ 0

Honda

Civic Hybrid CVT

Purchase Date

Prior to 1/1/08

$2,100

1/1/08 -- 6/30/08

$1,050

7/1/08 -- 12/31/08

$525

1/1/09 and later

$0

Lexus*

GS450h

Purchase Date

1/1/06 -- 9/30/06

$1,550

10/1/06 --3/31/07

$ 775

4/1/07 -- 9/30/07

$ 387.50

10/1/2007 and later

$ 0

Lexus *

RX 400h 4WD

Purchase Date

1/1/06 -- 9/30/06

$2,200

10/1/06 --3/31/07

$1,100

4/1/07 -- 9/30/07

$ 550

10/1/2007 and later

$ 0

Lexus*

RX 400h 2WD

Purchase Date

1/1/06 -- 9/30/06

$2,200

10/1/06 --3/31/07

$1,100

4/1/07 -- 9/30/07

$ 550

10/1/2007 and later

$ 0

Mercury

Mariner Hybrid 4WD

$1,950

Nissan

Altima Hybrid

$2,350

Saturn

Aura

$1,300

Saturn

Vue Green Line

$ 650

Toyota*

Camry Hybrid

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Toyota*

Prius

Purchase Date

1/1/06 -- 9/30/06

$3,150

10/1/06 --3/31/07

$1,575

4/1/07 -- 9/30/07

$787.50

10/1/2007 and later

$ 0

Toyota*

Highlander Hybrid 2WD

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Toyota*

Highlander Hybrid 4WD

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

* Credit for Toyota/Lexus vehicles are reduced for purchase after 10-1-06. See Notice 2006-78 for additional information.

** Credits for Honda vehicles are reduced for purchase after 1-1-08. See Notice 2007-98 for additional information.

2008 Model Year Hybrid Vehicles

Make

Model

Credit Amount

Chevrolet

Malibu Hybrid

$1,300

Chevrolet

Tahoe Hybrid 2WD and 4WD

$2,200

Ford

Escape Hybrid 2WD

$3,000

Ford

Escape Hybrid 4WD

$2,200

GMC

Yukon Hybrid

$2,200

Honda**

Civic CVT

Purchase Date

Prior to 1/1/08

$2,100

1/1/08 -- 6/30/08

$1,050

7/1/08 -- 12/31/08

$525

1/1/09 and later

$0

Mazda

Tribute 2WD

$3,000

Mazda

Tribute 4WD

$2,200

Mercury

Mariner Hybrid 2WD

$3,000

Mercury

Mariner Hybrid 4WD

$2,200

Nissan

Altima Hybrid

$2,350

Saturn

Aura hybrid

$1,300

Saturn

Vue Green Line

$1,550

Toyota*

Camry Hybrid

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Toyota*

Prius

Purchase Date

1/1/06 -- 9/30/06

$3,150

10/1/06 --3/31/07

$1,575

4/1/07 -- 9/30/07

$787.50

10/1/2007 and later

$ 0

Toyota*

Highlander Hybrid 4WD

Purchase Date

1/1/06 -- 9/30/06

$2,600

10/1/06 --3/31/07

$1,300

4/1/07 -- 9/30/07

$ 650

10/1/2007 and later

$ 0

Lexus*

RX 400h 2WD and 4WD

Purchase Date

1/1/06 -- 9/30/06

$2,200

10/1/06 --3/31/07

$1,100

4/1/07 -- 9/30/07

$ 550

10/1/2007 and later

$ 0

Lexus*

LS 600h L Hybrid

Purchase Date

1/1/06 -- 9/30/06

$1,800

10/1/06 --3/31/07

$900

4/1/07 -- 9/30/07

$ 450

10/1/2007 and later

$ 0

Now that you know how much you might qualify for, you need to figure out if you qualify for the credit. That will depend on several factors, not the least of which is how much you earned and what the Alternative Minimum Tax is. I am not a tax expert, but you should definitely read my post on will you qualify for the federal tax credit on hybrid cars. Many people will not get the full credit amount or will not get any tax break.

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